Solicitors Accounts Regulations
The Solicitors Accounts Regulations (S.I. No. 118/2023) came into operation on 1 July 2023. This new suite of regulations replaced the Solicitors Accounts Regulations 2014.
Key changes at a glance
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Solicitors are required to prepare balancing statements in respect of transactions on the client account every three months instead of every six months. The balancing statement balances what is in the client account against what should be in the client account. This shorter period between each statement means deficits will be more easily detected. Ideally, your bookkeeper should be doing bank reconciliations monthly which will pick-up anomalies and ensure that bi-annual balancing statements are relatively simple to produce.
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Solicitors will be required to review the listing of client ledger balances for undue and unnecessary delay in dealing with matters, in particular, in discharging undisbursed outlay, moneys due to clients and monies due to be paid out for or on behalf of clients.
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Solicitors will be required to list client ledger balances outstanding for two years at appendix six to the accountant’s report or more, disclosing the reason the balance is outstanding and, where appropriate, any action taken, or proposed, to clear the balances.
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The inclusion of the list of balances outstanding two years or more in the reporting accountant’s report will provide evidence to the Law Society that client ledger balances have been reviewed for undue or unnecessary delays.
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If the client wont cash the cheque consider sending a bank draft, advising the client that they are prohibited by the Law Society from holding the money.
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An authorised signatory must be a solicitor who is a partner or the sole practitioner in the firm with a practising certificate in force. Where there are co-signatories, at least one of the co-signatories is to be a solicitor with a practising certificate in force. In exceptional circumstances, a person other than a solicitor with a practising certificate in force may act as an authorised signatory, but only with the prior approval of the Law Society.
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If a solicitor cannot rectify a deficit of client funds within seven days of it coming to the attention of the solicitor, the solicitor will be required to notify the Law Society in writing, as soon as practicable unless the deficit arises as a result of bank error or the charging of negative interest refunded to the client account.
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It is the experience of the Law Society that the earlier that deficits are notified to the Law Society, the more likely the deficit can be rectified quickly, with better outcomes for clients.
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Regulation 35(1) makes clear that solicitors shall not borrow from a client unless the client has been independently legally advised. Client accounts are not to be used by solicitors for the purpose of loans to a solicitor from a client, or for the purpose of loans by a solicitor to a client or for the purpose of loans between clients of a solicitor.
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Where a solicitor withdraws money from the client account by cheque or by electronic transfer for the purposes of making a payment in cash to a client or a third party in excess of €100, the solicitor will be required to obtain documentary evidence of payment of such moneys. Such evidence to include the witnessed signature of the recipient of the moneys.
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It is a regulatory breach for a solicitor to withdraw moneys from the client account towards payment of outlay due to the solicitor or in satisfaction of professional fees, without relating such withdrawal to a specific client.
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Bills of costs are to be furnished in accordance with the provisions of the Legal Services Regulation Act 2015. Solicitors must maintain on file documentary evidence of compliance with Section 68 of Solicitors (Amendment) Act 1994 and Section 149 to 153 (inclusive) of the Legal Services Regulation Act 2015.
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The definition of client moneys shall not include moneys received or held by a solicitor other than, in respect of legal services provided by a solicitor, or to be provided, arising from the solicitors practice as a solicitor. If no legal service is being provided, the funds should not be paid into or continue to be held in the client account. It shall be a breach of the regulations to pass funds through client account where no legal service is being provided.
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The definition of client moneys shall not include moneys received by a solicitor while conducting a personal, legal or financial matter. However, a solicitor may pay into the client account such moneys as are the proceeds of a loan to the solicitor from a financial institution specifically for a personal legal transaction for the purchase of a property by a solicitor who is engaged in the transaction, provided the funds are discharged from the client account in accordance with the terms of the loan or within 14 days of receipt. It shall be a breach of the regulations for a solicitor to hold any personal moneys in the client account.
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Records of electronic transfers on the client account are to be retained on the client file and on a separate file dedicated to such transactions. A solicitor will be required to ensure that back-ups of computerised information are performed on a timely basis and stored securely other than on the practice office premises. Accounting records for a least the current financial year and the previous financial year must be retained. In addition, solicitors are required to maintain a register of money held on joint deposit, and a register of undertakings.
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Where the Reporting Accountant forms an opinion (or has reasonable grounds to suspect) that there is a deficit of client funds which cannot be rectified within seven days, or that there are entries in the books of account which have been made to conceal the existence of a deficit, the reporting accountant may directly notify the Registrar of Solicitors. The reporting accountant will not be required to disclose any information that may amount to a breach of any enactment or rule of law.
